Tips for Debt Settlement

If you are looking for tips for debt settlement or reviews of the best debt settlement companies to help you reduce or eliminate your debt, here’s one tip for you: AVOID THEM!

You’ve seen or heard of ads promising to settle your debt for pennies on the dollar. It sounds great, and you might easily decide that debt settlement is the right thing to do to quickly eliminate your financial problems. Hold that thought for a moment. Read this tips for debt settlement article before you do anything.

Debt settlement and other debt relief programs have been ubiquitous in the past years, more so during these hard economic times. People get desperate to clean up their financial mess caused by such things as excessive credit card debt or huge medical bills. These people are willing victims to these types of companies.

Let’s talk about debt settlement and how these companies operate. Depending on each companies’ policy, they will accept you in their program if you have unsecured debt totaling from a minimum between $2,000-$10,000. They will find out about your present situation and “help” you come up with a payment plan which usually lasts about 36 months or so.

Once you engage the services of a debt settlement company, the first thing they will ask you to do is stop paying your creditors. With the payment plan you arranged with them, you will be sending that amount to be held at escrow. They will only start negotiating with your creditors once you have enough money at escrow. This will usually begin between the 6th-8th month into the program.

You will then inform your creditors by letter that you are now being represented by the debt settlement company, and any communication, negotiation or settlement should be handled by them. You will also order your creditors to stop calling and harassing you in your home, mobile phone and work.

You creditors, by law, should stop calling or harassing you if you formally ask them, but they are not obligated to negotiate with the debt settlement company or stop them from suing you.

You will receive notifications from the debt settlement company for every successful settlement they get, and shows you the amount a particular debt was settled for.

In my opinion, there is nothing that these debt settlement companies can do which you can’t do on your own, and without paying the high fees. The average settlement they get is around 40-50 percent. Some of your creditors, at some point, “may” even offer you this discount to settle your outstanding debt...or negotiate it yourself.

If you do the math: successful settlement is about 40-50 percent of the total debt, plus taxes (yes, you may have to pay a tax to the IRS for the difference), plus the company fees...you get the point?

To end this tips for debt settlement article, here’s my final tip: If you really don’t want to deal with creditors and would rather let a debt settlement company handle the negotiations for you, choose a company whose fees and commissions are based on the settlement amount.

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